Purple Co's employees carry out work to the value of $7500. They are paid $4500 immediately with the balance to be settled in the next accounting period. Under the accrual approach to profit measurement the amount of wages expense that will be recorded in the current period is:

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Quizplus · Accepted Answer

Under the accrual approach to profit measurement, expenses are recognized when they are incurred, not necessarily when they are paid. In this case, the work carried out by the employees (to the value of $7500) is the expense incurred by Purple Co in the current period, regardless of the payment timing. Therefore, the full $7500 is recorded as wages expense in the current period.

Purple Co's Employees Carry Out Work to the Value of $7500